Bank of N.Y. Mellon v. Luna
| Decision Date | 19 November 2021 |
| Docket Number | No. 123,524,123,524 |
| Citation | 498 P.3d 1248 (Table) |
| Parties | The BANK OF NEW YORK MELLON f/k/a The Bank of New York as Trustee for the Certificateholders of CWALT, Inc. Alternative Loan Trust 2005-42CB Mortgage Pass-Through Certificates, Series 2005-42CB, Appellee, v. Guillermo LUNA and Lourdes Luna, Appellants. |
| Court | Kansas Court of Appeals |
Charles S. Scott Jr., of Shawnee, for appellants.
Aaron M. Schuckman, of Millsap & Singer, LLC, of St. Louis, Missouri, for appellee.
Before Schroeder, P.J., Warner and Isherwood, JJ.
Guillermo and Lourdes Luna failed to make payments on a mortgage held by the Bank of New York Mellon (Bank). The Bank filed a petition for foreclosure on the property subject to the mortgage. Prior to the district court's decision in the foreclosure action, the Lunas clandestinely conveyed that property to Las Cumbres, LLC (Las Cumbres) through a quitclaim deed. Guillermo Luna is a registered agent of Las Cumbres. The district court granted the Bank's motion for summary judgment on the foreclosure action and the Lunas filed a motion for relief from judgment, arguing they were not subject to judgment because they no longer owned the property. Their motion was denied. The Lunas bring the matter to us and present two arguments. First, they contend that the district court's judgment is invalid because at the time it entered its order, the Lunas no longer had standing, and the court no longer had subject matter jurisdiction based on the conveyance of the property. Second, they argue that error occurred when the district court failed to add Las Cumbres as a necessary party to the action in violation of K.S.A. 2020 Supp. 60-219. We are not persuaded. Our analysis of the case reveals that the district court had subject matter jurisdiction over the foreclosure action and, although Las Cumbres may be considered a necessary party to obtain clear title, error did not result from its absence from this action. The decision of the district court is affirmed.
On May 31, 2005, the Lunas executed a promissory note for $177,000 with First Magnus Financial Corporation. They executed a separate mortgage for an Overland Park property (the Property) that they owned and used as a rental property. The Property was intended to serve as collateral for the note. First Magnus Financial Corporation later assigned the Lunas' mortgage and note to the Bank.
Beginning November 1, 2011, the Lunas failed to make their mortgage payments. Two years later, the Bank filed a foreclosure action on the Property and sought an in personam judgment against the Lunas. In 2013 and 2015, the Lunas petitioned for bankruptcy and, on both occasions, listed the Property as an asset in their bankruptcy filings.
The Bank moved for summary judgment in the foreclosure action. On April 19, 2018, the court conducted a hearing on the motion and took the matter under advisement at the conclusion of the proceedings. Following the hearing, the Lunas surreptitiously conveyed the Property to Las Cumbres, a Missouri entity, through a quitclaim deed. In exchange, Las Cumbres paid the Lunas $10. Las Cumbres did not register in Kansas until May 2019, and Guillermo Luna was listed as its registered agent. Notably, during December 2018 and January 2019, the Lunas told the district court they were seeking to refinance their loan on the Property. They did not disclose to the court that they conveyed the Property to Las Cumbres shortly after the summary judgment hearing six months earlier.
The district court granted the Bank's motion for summary judgment and entered a judgment of foreclosure for the Bank on June 19, 2019. The Bank's relief was in rem.
The Lunas filed a motion for relief from judgment under K.S.A. 2020 Supp. 60-260(b)(4) and argued that following the conveyance, they no longer had standing, and the district court lacked subject matter jurisdiction to enter a ruling on the Bank's foreclosure motion. They also argued that the district court lacked subject matter jurisdiction because it neglected to add Las Cumbres as a necessary party to the foreclosure action. The Property was sold at a sheriff's sale before the court ruled on the Lunas' motion.
The district court held a hearing on the motion for relief from judgment and the Lunas reiterated the arguments advanced in their written motion. They did acknowledge that the court had jurisdiction prior to the conveyance. The Bank claimed the Lunas waived their jurisdiction and necessary party arguments because they failed to raise them in response to either the Bank's petition or its summary judgment motion. Additionally, the Bank argued that Las Cumbres had actual notice of the pending litigation as it was the Lunas' personally registered company. Finally, the Bank asserted that by operation of Kansas' lis pendens (pending litigation) statute, K.S.A. 60-2201, Las Cumbres took the Property with notice and subject to the disposition of the case.
The Lunas' motion was denied. In entering its ruling, the district court remarked that it sounded like "a put-up deal" and that the Lunas were "pretty much aware of the fact that the foreclosure is moving forward and that it's subject to being eventually going to judgment."
The Lunas timely appealed and seek our opinion on the matter.
The Lunas' position has not changed from what it was before the district court. They still contend that the district court did not have subject matter jurisdiction when it granted the foreclosure petition because, at that time, the property had been conveyed to Las Cumbres. According to the Lunas, they no longer had any interest in the property, effectively ending the case or controversy and, without that case or controversy, the court did not have subject matter jurisdiction.
The Lunas argue that this court has unlimited review because the issue is whether the district court had subject matter jurisdiction. In contrast, the Bank asserts that we should apply an abuse of discretion standard because the fundamental issue the Lunas are appealing is the propriety of the district court's denial of their motion for relief from judgment. The Bank is correct.
"This court reviews a trial court's decision on a K.S.A. 60-260(b) motion for abuse of discretion." Board of Sedgwick County Comm'rs v. City of Park City , 41 Kan. App. 2d 646, 658, 204 P.3d 648 (2009). " ‘Abuse of discretion occurs when judicial action is (1) arbitrary, fanciful, or unreasonable; (2) based on an error of law; or (3) based on an error of fact.’ " Biglow v. Eidenberg , 308 Kan. 873, 893, 424 P.3d 515 (2018) (quoting Kaelter v. Sokol , 301 Kan. 247, 250, 340 P.3d 1210 [2015] ). "An appeal from an order denying a motion under K.S.A. 60-260(b) brings up for review only the order of denial itself and not the underlying judgment." Ellis v. Whitaker , 10 Kan. App. 2d 676, 677, 709 P.2d 991 (1985).
The Lunas raised this issue in their motion for relief from judgment, the district court denied the motion, and the Lunas timely appealed. The issue is properly preserved.
The Bank first argues that the Lunas waived the subject-matter jurisdiction argument. It cites K.S.A. 2020 Supp. 60-212(b)(1), which provides that The Bank contends that the Lunas waived this argument because they did not raise the subject matter jurisdiction argument until after the district court granted the Bank's summary judgment motion on the petition for foreclosure.
To support the waiver argument, the Bank cites to two cases that found waiver of the affirmative defense of estoppel where the defendant failed to raise it in the responsive pleading: Turon State Bank v. Bozarth , 235 Kan. 786, Syl. ¶ 1, 684 P.2d 419 (1984) (), and Coffman v. State , 31 Kan. App. 2d 61, 67, 59 P.3d 1050 (2002) ().
That said, the notable distinction here is that subject matter jurisdiction can be raised any time, by any party, or by the court on its own motion. KNEA v. State , 305 Kan. 739, 743, 387 P.3d 795 (2017) ; see also Akesogenx Corp. v. Zavala , 55 Kan. App. 2d 22, 37, 407 P.3d 246 (2017) (). To that end, this issue was not waived.
The Lunas argue that the district court did not have subject matter jurisdiction when it ordered the Property's foreclosure. "Subject matter jurisdiction establishes the court's authority to hear and decide a particular action." Sleeth v. Sedan City Hospital , 298 Kan. 853, 868, 317 P.3d 782 (2014). "The requirement that a party have standing is a component of subject matter jurisdiction ...." Creecy v. Kansas Dept. of Revenue , 310 Kan. 454, 459, 447 P.3d 959 (2019) (citing Sierra Club v. Moser , 298 Kan. 22, 29, 310 P.3d 360 [2013] ). "To demonstrate standing in Kansas, the traditional test is twofold: ‘a person must demonstrate that he or she suffered a cognizable injury and that there is a causal connection between the injury and the challenged conduct.’ " Cochran v. Kansas Dept. of Agriculture , 291 Kan. 898, 908, 249 P.3d 434 (2011) (citing Board of Sumner County Comm'rs v. Bremby , 286 Kan. 745, 761, 189 P.3d 494 [2008] ). "The existence of jurisdiction and standing are both questions of law over which an appellate court has...
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